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on Small Business Management |
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Issue of 2024‒09‒09
twelve papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Chuantao Cui (Bay Area International Business School, Beijing Normal University); Leona Shao-Zhi Li (University of Macau) |
| Abstract: | This study explores how local leaders’ career incentives influence entrepreneurial activity in China. We identify a positive relationship between high-incentive leaders and the entry rate of new manufacturing firms, facilitated by access to capital and land and the implementation of place-based policies. However, firms that enter the market under high-incentive leaders tend to experience lower productivity growth and lower survivability, highlighting a quantity–quality trade-off. This quality deficit is linked to a mismatch between the types of new entrants and local economic fundamentals. Additionally, the responsiveness of manufacturing exit rates, productivity growth of existing manufacturers, and service firm dynamics to leader incentives appears minimal. Overall, by illuminating both the advantages and limitations of second-best institutions through the lens of firm entry, our study provides new insights into the institutions–growth nexus and offers a cohesive framework for understanding the growth and slowdown of the Chinese economy. |
| Keywords: | Informal institution; career incentives; economic growth; firm dynamics; entrepreneurship |
| JEL: | H70 L26 O43 P35 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202417 |
| By: | Leonardo Mazzoni; Massimo Riccaboni; Erik Stam; ; |
| Abstract: | The quality of entrepreneurial ecosystems not only enables local startups, but also affects the attraction and supply of non-local founders. We conceptualize entrepreneurial ecosystems as open systems with inflows and outflows of entrepreneurial talent. Beyond individual agency, these talent flows are driven by the quality of the origin and destination entrepreneurial ecosystems. We use network analysis and gravity models to study the interregional flows of founders of non-local startups within Italy, and find empirical evidence for creation, attraction and supply mechanisms of entrepreneurial ecosystems. Entrepreneurial ecosystems provide a supportive environment for the creation of local startups, but also attract non-local (potential) founders. In addition, we reveal an escalator mechanism: (prospective) entrepreneurs tend to move from good to better entrepreneurial ecosystems. |
| Keywords: | entrepreneurial ecosystems; innovative startups; talent flows; non-local founders; complex systems; gravity models |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2426 |
| By: | Douglas Cumming; Randall Morck; Zhao Rong; Minjie Zhang |
| Abstract: | Because corporate limited liability protects founder’s personal assets, creditors often require founders of new, small and risky firms to contract around limited liability by pledging their personal assets as collateral for loans to their firms. This makes personal bankruptcy law (PBL) relevant to corporate finance. We find that pro-debtor PBL reforms increase the number of patents filed, citations to those patents, and début patents by firms with no previous patents. These reforms also redistribute innovation across industries in closer alignment to its distribution in the U.S., which we take to approximate industry innovative potential. These effects are driven by firms without histories of high-intensity patenting, and are damped in countries that impose minimum capital requirements on new firms. Firms with largescale legacy technology may avoid radical innovations that devalue that technology. Consequently, new, initially small and risky firms often develop the disruptive innovations that contribute most to economic growth. Consistent with this, we also find pro-debtor PBL reforms increasing value-added growth rates across all industries, and by larger margins in industries with more innovation potential. Our difference-in-differences regressions use patents and PBL reforms for 33 countries from 1990 to 2002, with subsequent years used to measure citations to patents in this period. |
| JEL: | G33 G5 K35 O3 O4 P1 P50 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32826 |
| By: | Yao Lu; Gordon M. Phillips; Jia Yang |
| Abstract: | We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI. |
| JEL: | D25 G3 G34 L20 L23 L25 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32811 |
| By: | Kim, Jong Duk (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Koo, Kyong Hyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Hyuk-Hwang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | In general, negative discussions and impressions regarding outward FDI, such as capital outflows, job losses, leakage of trade secrets, and hollowingout of domestic industries, seem to dominate. The controversy, which focused on greenfield investments in the past, seems to be widely applied to recent mergers and acquisitions (M&As). Against this backdrop, the purposeof this report is twofold: first, to improve the understanding of how the increase in Korean firms’ FDI through M&As and related innovation activities in the U.S. market affects the performance of the investing Korean firms and their domestic affiliates; and second, to provide objective long-term policy directions on outward FDI and firms’ innovation activities based on the results found using firm-level data. The following results and findings in each chapter of this report are presented as follows. On the theoretical side, based on the theoretical model developed by Akcigit, Ates, and Impullitti (2018), Chapter 2 examines the mechanisms through which FDI can affect the incentives to innovate and the financial performance of investing firms. Market integration through M&As creates a scale effect and a competitive effect. The cost of innovation also plays a role in firms’ innovation incentives and financial performance. A spillover expected from knowledge sharing resulting from access to a new market is an additional channel. Regarding the scale effect, access to large, developed markets is one of the reasons why direct investment is a rational choice for a firm’s innovation. Large markets tend to have more intermediate resources to use and a larger pool of information to share. However, access to a new market through FDI can change the competitive structure that the investing companies face. Direct access to a foreign market creates higher expected profits if an investing firm’s innovation is successful. Still, if it is not, the firm may face stiffer competition or be forced out of the market. The degree of monopoly power is indeed the main factor determining the profits of successful innovations. However, the firm’s current profit only lasts until the next innovation occurs, and if there is no subsequentinnovation that is better than that the competitor’s, the company’s profit will decrease or it will be exited from the market. To survive, companies need to continuously invest and work on innovation. The spillover of technologies and the knowledge embedded in the R&D performed or in the patents filed as part of these efforts are another channel through which companies strive for better quality and innovation. (the rest omitted) |
| Keywords: | outward FDI; mergers and acquisitions; firms innovation activities; long term policy directions |
| Date: | 2023–12–29 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieppa:2023_022 |
| By: | Anckaert, Paul-Emmanuel; Uhlbach, Wolf-Hendrik (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:aa9ac9d1-4531-43a1-bbb3-213419eb4217 |
| By: | Preißner, Stephanie; Raasch, Christina; Schweisfurth, Tim |
| Abstract: | This study investigates the sources of disruptive innovation. The disruptive innovation literature suggests that these do not originate from existing customers, in contrast to what is predicted by the user innovation literature. We compile a unique content-analytical dataset based on 60 innovations identified as disruptive by the disruptive innovation literature. Using multinomial and binomial regression, we find that 43% of the sample disruptive innovations were originally developed by users. Disruptive innovations are more likely to originate from users (producers) if the environment has high turbulence in customer preferences (technology). Disruptive innovations that involve high functional (technological) novelty tend to be developed by users (producers). Users are also more likely to be the source of disruptive process innovations and to innovate in environments with weaker appropriability. Our article forges new links between the disruptive and the user innovation literatures, and offers guidance to managers on the likely source of disruptive threats. |
| Keywords: | appropriability regime, disruptive innovation, environmental turbulence, functional novelty, radical innovation, user innovation |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:293964 |
| By: | Filippo Bontadini; Francesco Filippucci; Cecilia Jona-Lasinio; Giuseppe Nicoletti; Alessandro Saia |
| Abstract: | The paper presents novel indicators to measure financial sector digitalisation that cover 21 OECD countries over the 1995-2018 period, showing a significant increase in digital penetration though at different speeds and intensities across countries. The indicators are used to study the impact of financial sector digitalisation on economic activity, highlighting significant positive effects on the productivity of downstream industries. A 10% increase in financial sector digitalisation is associated with a 0.1 percentage point increase in productivity growth for the average industry, with a stronger impact in intangible-intensive industries. Digitalisation in finance is also associated with an easing of credit constraints, particularly benefiting intangible-intensive industries and SMEs, via an improvement in credit allocation and market conditions. Results suggest that policy actions aimed at supporting digital infrastructure, promoting competition in communications, fostering finance innovation, and encouraging high-level skill formation (especially in STEM fields) could sustain and enhance productivity growth through financial sector digitalisation. |
| Keywords: | Credit Allocation, Financial Sector Digitalisation, Intangibles, Productivity |
| JEL: | G00 O33 G38 |
| Date: | 2024–08–09 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1818-en |
| By: | Pontus af Buren; Jurg Schweri |
| Abstract: | In many European countries, firms engage heavily in the training of apprentices. The literature has investigated why firms provide such training, but almost no empirical evidence exists on how firms train and shape their apprentices' education outcomes. We investigate this question by estimating a training production function with employer-employee linked data on more than 3, 700 Swiss firms and their 9, 500 apprentices. Using measures derived from work psychology, we test whether apprentices are more likely to successfully complete training in standard time when they are trained in firms with better training processes. We find that apprentices are more successful in firms that assign tasks that make them find own solutions and that are more varied. We find only weak evidence for the hypothesis that the association of good training processes and education success is due to the assortative matching of good apprentices with good firms. We further show that our results are robust to different model specifications and formal sensitivity tests, suggesting an important role of firms and their training processes for apprentices' education success. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0225 |
| By: | Teng Ye; Jingnan Zheng; Junhui Jin; Jingyi Qiu; Wei Ai; Qiaozhu Mei |
| Abstract: | While small businesses are increasingly turning to online crowdfunding platforms for essential funding, over 40% of these campaigns may fail to raise any money, especially those from low socio-economic areas. We utilize the latest advancements in AI technology to identify crucial factors that influence the success of crowdfunding campaigns and to improve their fundraising outcomes by strategically optimizing these factors. Our best-performing machine learning model accurately predicts the fundraising outcomes of 81.0% of campaigns, primarily based on their textual descriptions. Interpreting the machine learning model allows us to provide actionable suggestions on improving the textual description before launching a campaign. We demonstrate that by augmenting just three aspects of the narrative using a large language model, a campaign becomes more preferable to 83% human evaluators, and its likelihood of securing financial support increases by 11.9%. Our research uncovers the effective strategies for crafting descriptions for small business fundraising campaigns and opens up a new realm in integrating large language models into crowdfunding methodologies. |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.09480 |
| By: | Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | This study examines how 'killer acquisitions' in the digital platform market have impacted innovation performance post-merger. This analysis focuses particularly on M&As among various types of corporate consolidations by digital platforms. It estimates factors influencing the probability of M&A by digital platforms and uses the technological similarity index between the acquiring digital platform and the acquired company as a key explanatory variable. Then, using the technological similarity index, the analysis categorizes the M&A cases involving digital platforms into 'killer acquisitions' and 'non-killer acquisitions' and compares innovation performance by type of acquisition. The analysis focused on identifying "killer acquisitions" by examining the technology similarity index between firms before and after M&As conducted by GAFAM. Killer acquisitions were defined as those with minimal change in the technology similarity index pre- and post-transaction. The study found that killer acquisitions negatively impact innovation, as measured by a significant decline in the number of patent applications from acquired companies, compared to non-killer acquisitions where patent applications tended to increase post-acquisition. These findings highlight the need for methodologies, such as the technological similarity index, to better identify and regulate such anti-competitive acquisitions in the digital platform sector. |
| Keywords: | Corporate Innovation; killer acquisitions; non-killer acquisitions; M&A |
| Date: | 2024–08–10 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kiepwe:2024_025 |
| By: | Bíró, A.;; Elek, P.; |
| Abstract: | We provide evidence on the impact of firm productivity on the health maintenance of employees. Using linked employer-employee administrative panel data supplemented with healthcare records from Hungary, we analyze the dynamics of healthcare use before and after moving to a new firm. We show that moving to a more productive firm leads to higher consumption of drugs for cardiovascular conditions and more physician visits, without evidence of deteriorating physical health, and, among older workers, to lower consumption of medications for mental health conditions. The results suggest that more productive firms have a beneficial effect on the detection of previously undiagnosed chronic illnesses and on the mental health of their employees. Plausible mechanisms include the higher quality of occupational health check-ups and less stressful job conditions. |
| Keywords: | firm productivity; healthcare use; mover identification; preventive care; |
| JEL: | I10 J32 J62 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:yor:hectdg:24/13 |